Opinion
Index No. 157252/2018 MOTION SEQ. Nos. 001 002 003
07-12-2023
FIVE TOWNS PEDIATRICS, P.C., D/B/A PEDIATRIC HEALTHCARE OF LONG ISLAND, Plaintiff, v. BILLET, FEIT & PREIS, P.C., MARGOLIN, WINER & EVENS, LLP, YUSSIE STEIER, and ALAN MATERAZO, Defendants.
Unpublished Opinion
DECISION + ORDER ON MOTION
HON. ANDREA MASLEY
The following e-filed documents, listed by NYSCEF document number (Motion 001) 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 139, 140, 141, 142, 143, 144, 145, 146, 149, 152, 164 were read on this motion to/for JUDGMENT - SUMMARY.
The following e-filed documents, listed by NYSCEF document number (Motion 002) 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 127, 128, 129, 130, 131, 132, 147, 150, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163 were read on this motion to/for JUDGMENT - SUMMARY.
The following e-filed documents, listed by NYSCEF document number (Motion 003) 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 133, 134, 135, 136, 137, 138, 148, 151, 153 were read on this motion to/for SUMMARY JUDGMENT (AFTER JOINDER).
In motion sequence number 001, plaintiff Five Towns Pediatrics, P.C. moves pursuant to CPLR 3212 for summary judgment dismissing the third-party claim and counterclaim for contribution by defendants Billet, Feit & Preis P.C. (BFP) and Yussie Steier (together, BFP Defendants) and the counterclaim for indemnification of defendants Margolin, Winer &Evens, LLP (MWE) and Alan Materazo (together, MWE Defendants).
Plaintiff's shareholders are Abraham Green, M.D., Mosche Schlusselberg, M.D. and Judith Green, M.D. (NYSCEF 124, BFP's Rule 19A Statement ¶ 2; NYSCEF 138, Plaintiff's Response to BFP's Rule 19A Statement, ¶ 2 [admit].)
In motion sequence number 002, the MWE Defendants move pursuant to CPLR 3212 for summary judgment dismissing the complaint and granting partial summary judgment on their contractual indemnification counterclaim.
In motion sequence number 003, the BFP Defendants move pursuant to CPLR 3212 for summary judgment dismissing the complaint.
This is an action for accounting malpractice. The BFP Defendants were engaged by plaintiff from 2009 to May 2015 and June 2017 to January 2018 to perform accounting services. (NYSCEF 82, Verified Complaint ¶¶ 9,10.) Plaintiff fired BFP and Steier in May 2015 because plaintiff was not satisfied with Steier's handling of certain real estate transactions. (NYSCEF 133, Schlusselberg aff ¶ 10; NYSCEF 121, trat 190:9-191:2 [Green Depo]; NYSCEF 118, trat86:2-22 [Schlusselberg Depo].) Plaintiff engaged MWE from March 2015 until December 2017. (NYSCEF 133, Schlusselberg aff ¶¶19, 25.) MWE was fired in 2017 "due to [an] error that had been committed with regard to individual tax preparation for Dr. Green." (Id. ¶ 25.) Plaintiff then rehired BFP, but eventually hired a new accountant because plaintiff's mortgage required bank approval of plaintiff's accounting firm and the bank holding plaintiff's mortgage would not approve BFP. (NYSCEF 118, tr at 134:22-135:6 [Schlusselberg Depo].) After hiring the new accounting firm, it was discovered that plaintiff's practice administrator, Peter Singh, was embezzling money from plaintiff. (Id. at 140.) Plaintiff alleges that defendants' failure to discover this fraud was malpractice and that is the basis of this action. (NYSCEF 82, Verified Complaint ¶ 34; NYSCEF 133, Schlusselberg aff ¶¶ 10, 24-25.)
The September 2015 engagement letter is signed by Materazo on behalf of MWE and provides that Materazo "is the engagement partner assigned to the compilation of the Company's financial statements and will be responsible for supervising the engagement and issuing our report on the Company's financial statements." (NYSCEF 102, September 2015 Engagement Letter at 2.)
The court notes that the first engagement letter was dated September 11,2015 and was executed by plaintiff on September 18, 2015. (See NYSCEF 102, September 2015 Engagement Letter.)
Motion Seq. No. 002 - Summary Judgment (MWE Defendants)
This motion is granted, in part. Plaintiff and MWE entered into four engagement letters in September 2015, January 2016, September 2016, and April 2017. (NYSCEF 102-104, Engagement Letters.) The engagement letters clearly document the scope of the engagement: prepare tax returns and compilations. (Id.) There is no ambiguity and plaintiff cannot create one. (Universal Am. Corp, v National Union Fire Ins. Co. of Pittsburgh, PA., 25 N.Y.3d 675, 680 [2015] [citation omitted] ["[P]arties cannot create ambiguity from whole cloth where none exists, because provisions 'are not ambiguous merely because the parties interpret them differently.'"].)
Plaintiff's attempt to expand the services to be provided based on its "know your client" theory is barred by the parol evidence rule. "Parol evidence-evidence outside the four corners of the document-is admissible only if a court finds an ambiguity in the contract. As a general rule, extrinsic evidence is inadmissible to alter or add a provision to a written agreement." (Schron v Troutman Sanders LLP, 20 N.Y.3d 430, 436 [2013]; see also W.W.W. Assocs. v Giancontieri, 77 N.Y.2d 157, 163 [1990] [citation omitted] ["It is well settled that 'extrinsic and parol evidence is not admissible to create an ambiguity in a written agreement which is complete and clear and unambiguous upon its face.'"].) Here, the engagement letters are unambiguous.
MWE was not engaged to perform an audit or forensic accounting or any other services to determine why plaintiff's owners were not taking home more money as plaintiff suggests. The engagement letters make clear that, in providing tax preparation services, MWE would rely on the documents provided by the plaintiff and would not audit or verify accuracy of these documents. (See NYSCEF 101, 103, 104, September 2015 and 2016 and April 2017 Engagement Letters ["As part of our compilation engagement, we will issue a report that will state that we did not audit or review the financial statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management and accordingly, we do not express an opinion, a conclusion, nor provide any assurance on them"]; NYSCEF 102, January 2016 Engagement Letter ["We will not audit or independently verify the data you submit"].) "[A]n accountant and client may contractually agree that the accountant is not to perform certain services, thereby absolving the accountant of liability for not performing them." (Channel Fabrics, Inc. v Skwiersky, Alpert & Bressler LLP, 2022 NY Mise LEXIS 8980, *4 [Sup Ct, NY County 2022] [citation omitted].)
Further, the court will not permit plaintiff to expand the scope of the engagement letters based on MWE's initial proposal when it was pitching its services. (See NYSCEF 100, Proposal.) The engagement letters constitute the parties' agreement not the initial proposal. Plaintiff's belief that MWE was providing consulting and investigatory services as to why the doctors were not making more money does not make it so and certainly plaintiff's belief does not alter the parties' agreement. While MWE may have been plaintiff's company accountant, per the terms of the agreements, it did not agree to be an auditor or investigator.
"A party alleging a claim of accountant malpractice must show that there was a departure from the accepted standards of practice and that the departure was a proximate cause of the injury." (KBL, LLP v Community Counseling & Mediation Servs., 123 A.D.3d 488, 488 [1st Dept 2014] [citation omitted].) Here, plaintiff fails to raise an issue of fact that MWE departed from the standards of practice for the services it agreed to provide. Although plaintiff avers that MWE was fired in 2017 "due to [an] error that had been committed with regard to individual tax preparation for Dr. Green." (NYSCEF 127, Schlusselberg aff ¶ 25), plaintiff's malpractice claim is not based on that alleged error, but rather on MWE's alleged failure to audit or detect Singh's embezzlement. (Italia Imports v Weisberg & Lesk, 220 A.D.2d 226, 226 [1st Dept 1995] [holding that defendant was not liable for negligence when it failed to discover "defalcations of the bookkeeper" where there was no agreement to review or audit plaintiff's financial condition].) Thus, the complaint is dismissed against the MWE Defendants.
The MWE Defendants also seek partial summary judgment on their indemnification counterclaim. They assert that, pursuant to three engagement letters, plaintiff is required to indemnify the MWE Defendants for the costs they incurred for defending this action.
"[T]he long-standing 'American rule' precludes the prevailing party from recouping legal fees from the losing party 'except where authorized by statute, agreement or court rule.'" (Gotham Partners, L.P. v High Riv. Ltd. Partnership, 76 A.D.3d 203, 204 [1st Dept 2010] [citation omitted].) "For an indemnification clause to serve as an attorney's fees provision with respect to disputes between the parties to the contract, the provision must unequivocally be meant to cover claims between the contracting parties rather than third-party claims." (Id. at 207; see also Hooper Associates, Ltd. v AGS Computers, Inc., 74 N.Y.2d 487, 492 [1989] [citation omitted] ["[T]he court should not infer a party's intention to waive the benefit of the [American] rule unless the intention to do so is unmistakably clear from the language of the promise."].)
The September 2015 and 2016 and April 2017 engagement letters provide,
"[t]he Company agrees to indemnify and hold us harmless from and against any and all liabilities and costs (including, but not limited to, legal fees and costs of legal counsel) that we might incur that in any way arise out of, are connected with or caused by a knowing misrepresentation made to us by a member of the Company's management, regardless of whether or not such person was acting in the Company's interest."(NYSCEF 101, 103, 104.) This broad provision makes no explicit mention that MWE may recoup attorneys' fees and costs if sued by plaintiff client. "[N]othing in the provision nor the agreement as a whole makes 'unmistakably clear' that the [parties] intended to permit recovery for attorney's fees in an action between them on the contract." (Sage Sys., Inc. v Liss, 39 N.Y.3d 27, 33 [2022] [citation omitted].) Absent an unmistakably clear intent, this court will not expand this provision to waive the American Rule. Thus, the MWE Defendants' motion for partial summary judgment on their counterclaim is denied.
Motion Seq. No. 003 - Motion for Summary Judgment (BFP Defendants)
This motion is granted. The BFP Defendants argue that plaintiff's action is barred by a three-year statute of limitations. (CPLR 214[6].) However, plaintiff asserts that the continuous representation doctrine tolls the three-year statute of limitations.
"The continuous representation doctrine tolls the running of the statute of limitations on a claim arising from the rendition of professional services only so long as the defendant continues to advise the client 'in connection with the particular transaction which is the subject of the action and not merely during the continuation of a general professional relationship.'" (Booth v Kriegel, 36 A.D.3d 312, 314 [1st Dept 2006] [citations omitted]; see also Pace v Horowitz, 190 A.D.3d 619, 619 [1st Dept 2021] [citations omitted] ["The continuous representation doctrine toll does not apply based merely on the existence of an ongoing professional relationship, but only where the particular course of representation giving rise to the particular problems resulting in the alleged malpractice is ongoing."].) BFP was terminated in 2015 and ceased providing any services to plaintiff until it was rehired in 2017. (NYSCEF 121, tr at 190:9-191:2, 201:23-202:8 [Green Depo]; NYSCEF 118, trat 86:2-22, 100:6-24 [Schlusselberg Depo]; NYSCEF 119, trat 100:25-101:9, 104:3-21 [Steier Depo].) This is not continuous representation. BFP provided no services during the limitations period that tolled the running of the statute of limitations. (See Booth, 36 A.D.3d at 314.) There was no uninterrupted course of services. (Sendar Dev. Co., LLC v CMA Design Studio P.C., 68 A.D.3d 500, 503 [1st Dept 2009] [Plaintiff must show that it relied upon an uninterrupted course of services related the duty allegedly breached.].) Further, there was no mutual understanding that BFP would perform future services. (McCoy v Feinman, 99 N.Y.2d 295, 306 [2002] ["The continuous representation doctrine tolls the statute of limitations only where there is a mutual understanding of the need for further representation on the specific subject matter underlying the malpractice claim."].)
As plaintiff filed this action on August 3, 2018, plaintiff's action is barred against the BFP Defendants for services provided before August 3, 2015. As to the alleged malpractice for the six-month period of 2017 to 2018, plaintiff fails to raise an issue of fact as to whether BFP departed from accepted standards of practice which was the proximate cause of plaintiff's loss. BFP's engagement was to prepare tax returns and compilations; not to audit BFP's books or perform a forensic accounting. (NYSCEF 118, tr at 141-142 [Schlusselberg Depo]; NYSCEF 98, tr. at 104-105:19 [Steier Depo]; NYSCEF 120, tr. at 141:3-142:21 [Plaintiff's Expert Depo].) Just like with the MWE Defendants, plaintiff cannot expand BFP's engagement with its "know your client" theory for which it offers no legal support. Further, BFP was terminated before it could really begin its second engagement, which was identical to MWE's engagement -to prepare tax returns and compilations. (Id.) Indeed, the tax returns could not be prepared before the year ended. (NYSCEF 120, tr. at 168:10-169:12 [Plaintiff's Expert Depo].)
Finally, as stated above, "[a] party alleging a claim of accountant malpractice must show that there was a departure from the accepted standards of practice and that the departure was a proximate cause of the injury." (KBL, LLP, 123 A.D.3d at 488 [citation omitted].) Here, plaintiff fails to raise an issue of fact that BFP departed from the standards of practice for the services it agreed to provide. Nevertheless, even if BFP deviated from the acceptable standard of care, plaintiff also fails to raise an issue of fact as to proximate cause. To the contrary, the evidence shows that plaintiff's own failure to supervise Singh and to prevent his embezzlement is the proximate cause of its damages. (See D.D. Hamilton Textiles, Inc. v Estate of Mate, 269 A.D.2d 214 [1st Dept 2000]; Brooks v Lewin, 21 A.D.3d 731 [1st Dept 2007]; Kristina Denise Enters., Inc. v Arnold, 41 A.D.3d 788 [2d Dept 2007].)
Motion Seq. No. 001 - Plaintiff's Motion for Summary Judgment
For the reasons stated above, plaintiff's motion for summary judgment dismissing the MWE Defendants' counterclaim for indemnification is granted, and the counterclaim is dismissed as the indemnification clause is not '"unmistakably clear' that the [parties] intended to permit recovery for attorney's fees in an action between them on the contract." (Sage Sys., Inc., 39 N.Y.3d at 33 [citation omitted].) Further, absent liability of the MWE Defendants, there is no basis for indemnification. (Nieves-Hoque v 680 Broadway, LLC, 99 A.D.3d 536, 537 [1st Dept 2012].)
Plaintiff also moves for summary judgment dismissing the BFP Defendants' third-party claim and counterclaim for contribution. The BFP Defendants filed a third-party complaint against Rachel Schlusselberg, plaintiffs alleged in-house bookkeeper, seeking contribution. (NYSCEF 70, Third-Party Complaint.) They also brought a counterclaim against plaintiff for contribution. (NYSCEF 68, Verified Answer with Counterclaim.)
"Contribution enables a joint tortfeasor that has paid more than its equitable share of damages to recover the excess from the other tortfeasors." (Sommer v Federal Signal Corp., 79 N.Y.2d 540, 555-556 [1992].) Thus, as the complaint is dismissed against the BFP Defendants, any claims for contribution are dismissed as moot.
Accordingly, it is
ORDERED that defendants Margolin, Winer & Evens, LLP and Alan Materazo's motion for summary judgment is granted, in part, and the complaint is dismissed with costs and disbursements to these defendants as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that defendants Billet, Feit & Preis P.C. (BFP) and Yussie Steier's motion for summary judgment is granted, and the complaint is dismissed with costs and disbursements to these defendants as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that plaintiff Five Towns Pediatrics, P.O.'s motion for summary judgment dismissing the third-party claim and counterclaim for contribution by defendants Billet, Feit & Preis P.C. and Steier and the counterclaim for indemnification of defendants Margolin, Winer & Evens, LLP and Materazo is granted in so far as the counterclaim for indemnification is dismissed and the third-party claim and counterclaim for contribution is dismissed as moot; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.